Energy battles loom as Waxman and Markey attack derivatives bill

Rep. Henry Waxman (D-Calif.) has scheduled a subcommittee hearing to look at the “unintended impact” of derivatives regulation.

Waxman, the chairman of the House Energy and Commerce Committee, fears that plans to reign in derivatives trading will interfere with current regulation of electricity and natural gas markets.

{mosads}The Dec. 2 hearing announced this week will focus on legislation considered by both the Financial Services and Agriculture committees.

Waxman worries the bill was “not developed with adequate regard to how the nation’s energy markets actually function.” Rep. Ed Markey (D-Mass.), chairman of the energy subpanel that will hold the hearing, went even further.

“The derivatives legislation that has been under consideration in the House needs to be fixed in order to prevent it from interfering with our nation’s electricity and natural gas markets,” he said in a prepared statement.

Waxman and Markey fear the bill’s expansive definition of “swaps”  would bring CFTC regulation of several types of contracts used in power markets, such as certain transmission contracts, that are now overseen by electricity regulators.

“These markets are already regulated by the FERC [Federal Energy Regulatory Commission].  Inserting commodities regulations into them could have a disruptive impact on the fair and orderly operation of these markets,” Markey said.

The Energy and Commerce Committee has jurisdiction over FERC, while the Agriculture Committee oversees the commodity regulators.

Tyson Slocum, who runs the energy program at the watchdog group Public Citizen, said the hearing is part of a broader jurisdictional tussle between energy market regulators.

“What we have seen here this year is a new chairman of the CFTC who has aggressively inserted himself into the energy and climate debate at time when [FERC Chairman Jon] Wellinghoff has been preoccupied with transmission and renewable energy and energy efficiency, demand-response issues,” he said.

“It has been a big year for the CFTC and their allies in Congress, and FERC and their associated allies in terms of committees are playing a little bit of catch up,” Slocum added.

The division of labor between FERC and the CFTC is already a hot topic.

The sweeping climate change bill the House approved in late June – which Waxman and Markey sponsored – would divide oversight of new carbon emissions markets between the two agencies. FERC would regulate the cash market for emissions allowances and offset credits, while the CFTC would oversee derivative markets.

Pending Senate climate plans have only broad, preliminary language on the issue. The bill calls for a “single, integrated” carbon market oversight program.